Brookfield Asset Management Inc. is making a foray into the recycling business, creating a new firm with an investment of as much as US$700 million through its sustainability fund. 

Publicly traded Brookfield Renewable Partners LP struck a deal with Closed Loop Partners LLC to establish a company called Circular Services. 

The new entity, formed from the merger of five of Closed Loop's portfolio companies, will handle paper, metal, glass, plastic, textiles and other materials in seven states, including New York and Texas. It will be the largest closely held recycling company in the U.S., according to a statement. 

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Brookfield has invested US$200 million for a minority stake and committed as much as US$500 million more to help Circular Services pursue growth opportunities. The investment is being made via the Brookfield Global Transition Fund. 

“There's a massive opportunity to scale up the recycling infrastructure to actually provide more of the product that's really in demand, which is recycled materials,” Natalie Adomait, chief investment officer of the transition fund, said in an interview. The recycling rate in the U.S. is around 20 per cent to 30 per cent of waste, compared with 50 per cent in Europe, she said. 

Circular Services' capacity is expected to grow to five million tons annually, five years from now, compared with over one million tons a year today, said Ron Gonen, chief executive officer of Closed Loop Partners. 

Brookfield, the world's second-largest alternative investment firm, raised US$15 billion for a sustainable fund dedicated to projects that speed the shift away from fossil fuels. The fund is about 50 per cent committed so far, with investments in wind and solar energy, battery storage, carbon capture and nuclear power.